Considering converting primary home into first rental investment

[Laurieann Frazier-Duarte]

Hi Everyone,

So, I live in a location (Rockville, MD) mostly consisting of high-priced properties and find it difficult to consider SFHs for buy-and-hold purposes.  My strategy of interest is with buy-and-hold of SFHs and eventually commercial space. Distressed homes are hard to find, and I am learning that I don't have the fortitude to withstand the rehab process.

My goal continues to be finding residential and commercial (office/conference space) property for rental purposes over a one- to five-year period. To begin, I am considering renting my primary home because the loan is at a low interest rate, and the cash flow, based on comparable rentals in the area, is promising.  Cash flow will be around 1200.00 before maintenance set-asides.

Items of concern are getting to an ARV for appeal due to minor repairs, clean-up, and available cash required to acquire a new place to live.
1. Is it wise to borrow from the equity to make any necessary repairs, or should I delay the rental process until I acquire enough savings in 12+ months?    (Approx. 5 to 7k).  This seems not to be a viable option because there would be an increase in my interest rate.  I believe my home can benefit from minor renovations in the basement bathroom, new laundry appliances, painting, and replacing railings on the home's exterior.  

2.  In finding a new place to reside, I would again require funds for a downpayment on the purchase of a new home or reside in a rental myself until I save up enough funds for another purchase.  

3. A final choice would be to rent the primary in a few months, reside in a rental for several years, sell the primary, and purchase another SFH for rental and a SFH residence as a new primary.

Is this a viable place to begin investing?

Am I on the right track?

Any other things I should consider?

Thanks for any feedback.

Laurieann

[Drew Sygit]

@Laurieann Frazier-Duarte feedback:

1) How many competing rental properties have you toured to evaluate how your home compares? What repairs/improvements do you NEED to do, versus THINK? 
--Too many newbies do too little logical research! It isnt about what YOU want, it's about what the MARKET wants. Why spend money on unneeded repairs/improvements?

2) How serious are you about investing? What changes to your budget have you made to save more money for RE investing? You only need 3.5% down for an FHA mortgage.

3) Why aren't you house-hacking RIGHT NOW? 
-- Roommates could accelerate your savings and give you experience dealing with tenants.

How are you going to handle two mortgage payments while your rental sits vacant for a few months - or do you naively think everything rents instantly?
-- What market research have you done to find out the average Days On Market (DOM) for rentals in your area? Do NOT trust ANYONE! Have an agent send you a list of RENTED/SOLD properties for the last 12 months in your area showing DOM. Or look at the properties listed for rent on Zillow and note how long they've been posted.

How much is your primary worth and mortgage balance?
-- You should get a HELOC on it for emergency purposes before converting to rental.
-- Proceed CAUTIOUSLY as many will recommend using the HELOC for down payment on new primary home. NOT a good idea unless you really know what you are doing. The extra HELOC payment can cause negative cashflow, leading to possible foreclosure and/or bankruptcy.

Should you pursue RE investing?
---ABSOLUTELY!!!

You just need to do the proper research and have realistic steps to reach your goals:)

DM us for more advice.